Nubank Reorganizes Management in Push to Boost Profit, Expand
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COO appointed new president amid corporate reorganization
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Adjusted profit, revenue beat estimates in second quarter
August 15, 2022 at 6:01 PM EDT
Nu Holdings Ltd., the Brazilian digital bank that counts Warren Buffett’s Berkshire Hathaway Inc. as a backer, unveiled a corporate reorganization as it seeks to boost profitability and expand across Latin America.
The Sao Paulo-based company named Youssef Lahrech, currently the firm’s chief operating officer, to the newly created role of president, reporting directly to Chief Executive Officer David Velez. Co-founder Cristina Junqueira was appointed chief growth officer, responsible for spearheading expansion across Brazil, Mexico and Colombia.
Youssef has a vast experience in credit and will manage the performance of key metrics for global products as the company enters a new stage of growth, Velez said in an interview Monday. Concerning regional plans, he said “we’re at the beginning of the investment process in Mexico and Colombia, and the opportunity is huge.”
The lender’s stock has plunged by almost half since the company went public in December, amid a broader selloff in technology names and concern over potential growth in bad loans. Over the weekend, Rio de Janeiro-based fund Squadra Investimentos said it recently cut its short position in Nubank following the sharp decline in shares.
The reorganization comes amid plans to rein in costs and boost efficiency. The company reported quarterly results that topped estimates, with revenue reaching $1.2 billion in the second quarter versus consensus of about $1 billion. Adjusted net income $17 million also beat estimates.
Nubank shares were up 10% in extended trading after rising 10% during the regular session.
“Client monetization has been speeding up, while there’s a gigantic push to boost efficiency within the company, which ended up supporting our results,” Chief Financial Officer Guilherme Lago said.
The average revenue per active client, or ARPAC, rose to almost $8 in the second quarter from about $4, a year earlier. In a bid to rein in funding costs, Nubank announced last month that new Brazil deposits will only pay interest at the full benchmark rate -- known as CDI -- if the money stays in the account for more than 30 days. Before there was no holding time.
The percentage of loans more than 90 days overdue slipped to 4.1% in the second quarter versus 4.2% the previous quarter, holding steady even amid an overall worsening in credit quality across the region. Analysts at Goldman Sachs Group Inc. had been expecting a sharp deterioration, with the percentage rising to 4.9%.
“We see a degree of stability and might be entering a new cycle of normalization following the pandemic,” Lago said.